Finding a Bankruptcy Lawyer Near You

Understanding Bankruptcy

There are three types of bankruptcy, but each one comes with different parameters and qualifying factors. Find out if any of these options make sense for your current financial situation.

Chapter 7

When you file for chapter 7 bankruptcy, you can discharge certain types of debts in order to help you with overwhelming financial obligations you simply can’t meet.

There are some debts that cannot be discharged through chapter 7, which include:

• Student loans
• Child support
• Tax debt

Qualifying debt that can likely be discharged in chapter 7 included credit card debt, personal loans, and medical debt. The downside of this type of bankruptcy is that you could potentially lose assets in the process and will also suffer from bad credit which can take years to recover from.

In order to qualify for chapter 7 bankruptcy, you must pass a means test. This involves meeting certain income limits specific to your state as well as having certain levels of debt. You’ll need to submit information like records of your income, expenses, and debt.

When you qualify for chapter 7, you may have to sell certain assets that are non-exempt, such as valuables and investments. The proceeds of those sales go towards paying off your creditors as part of the settlement. Depending on your state, your car and house may be considered exempt assets, meaning you don’t have to sell them.

This decision definitely comes with a lot of major repercussions. If you’re unsure of how to navigate the process, consider enlisting the help of a bankruptcy attorney.

Chapter 11

Chapter 11 bankruptcy is designed for businesses to restructure their debt. The idea is to keep the business from going under by creating a different payment plan with your creditors. Individuals and small business owners may also be able to implement this type of bankruptcy. Here’s how it works.

When you voluntarily apply for chapter 11 bankruptcy, you have four months to create a repayment plan. You must prioritize your creditors and how you’re going to pay them. The three tiers are priority, secured, and unsecured.

Your repayment plan could last anywhere between six months and two years. You’ll also need to propose a plan on reducing your business expenses to improve your cash flow.

Chapter 11 bankruptcy can also apply to individuals in certain scenarios.

If you don’t qualify for other types of bankruptcy, you may be able to get relief this way. You could potentially renegotiate loan terms to pay less in interest and extend your payments to make them more manageable.

Just remember that the chapter 11 process is complicated and costly. It’s definitely smart to weigh all of your options before making a major decision.

Chapter 13

Chapter 13 bankruptcy allows you to keep your major assets (such as your home and car) while working out a payment plan to settle other debts. You must have consistent income in order to qualify and you’ll repay your creditors over a three to five-year period. The exact timeline depends on how much you earn each year.

For those with an income above the median, you’ll have five years to repay and for those with an income below the median, you’ll only have to pay for three years.

Here are the debt limits for chapter 13 to get an idea if you could qualify:

• Secured debts (including mortgage): $1,257,850
• Unsecured debts: $419,275

With secured debts, you have to pay as agreed, otherwise you’ll have to surrender the asset. You also need to make up for payments that are overdue.

From there, your unsecured debts are divided between priority and nonpriority payments. Your priority unsecured debt must be paid in full. These include things like tax debt, spousal support, or child support.

Your creditors that are categorized as nonpriority unsecured debt (like credit cards or medical bills) then get a percentage of what is considered your disposable income. Essentially, once your secured and prioritized debts are accounted for in your payment plan, any leftover amount of your income deemed eligible to go towards your payoff plan is used for these debts.

Once you finish your repayment period and meet all the other requirements, the debt is discharged.

Getting Legal Help

Clearly, there are a lot of laws and rules surrounding the different types of bankruptcy, which can be difficult to navigate on your own. But finding an affordable bankruptcy lawyer can be tough. Even the cheapest lawyers can cost $1,500 or more to help you with the process.

When is it worth it to hire legal help?

In reality, it’s smart to consult with an attorney as soon as you realize your financial problems are serious. Bankruptcy should be reserved for people who don’t have a way to keep up with their debts and are unlikely to repay them in full.

Most bankruptcy attorneys offer a free consultation so you can get some advice on whether or not bankruptcy is the right choice for you in this moment. From there, you can see whether or not you qualify, then get a quote on legal fees.

If you’re filing for chapter 7, you typically need to pay all of your attorney fees before filing, since the debt could otherwise be discharged. For chapter 13 bankruptcy, you can usually include your attorney fees as part of your repayment plan.

Don’t be afraid to interview a few different lawyers to compare their services and prices. Also look for online reviews to find out more about their reputation.

Frequently Asked Questions

by Lauren Ward

Personal Finance Writer

Lauren Ward is a personal finance writer with nearly ten years of experience covering topics like loans, credit, and real estate. She lives in Virginia with her husband and three children.